The Ramsey Show - App - If You Want to Be Rich, Talk to Rich People! (Hour 2)

Episode Date: February 7, 2020

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show, where debt is done, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I am Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. That's 888-825-5225. Rose is with us in Spokane, Washington. Hi, Rose. How are you?

I'm fine, thank you. How can I help? Well, I am looking at what my budget's going to look like after I've finish the emergency fund and we're in the saving for retirement. I'm 59, my husband is 61. And it's looking kind of sparse. I mean, when I look at that and I think, oh man, that, you know, we've, we just found your book in, in January. And, um, so, but we've lived mostly debt-free. We just have kind of had here

and there we'll say, oops, and hurry and pay it off. But, um, I'm looking at that and I'm thinking, oh, I need some motivation. I need to know how to say, okay, I can do this. I can live like that. But I'm not seeing the live like no one else on the end of this because it's such a short time between now and when we retire and those kind of things. So, do you have any ideas for how to encourage me? Well, if the second part of the, you live like no one else so that you can later live and give like no one else, means that you have $3 million and you live on a yacht in the Caribbean, that may not be there.

You mathematically may not be able to do that. You're right. But the other option is if you do nothing, you're going to be eating dog food. That would give me a reason to do it. Well, that's true. That's true. So, I mean, there's the upside, but there's also the downside. If I don't do this, I've got a real problem because, I mean mean you can't live on social security and eat that's true okay so we have to do this just to just to

maintain our dignity now how much debt do you have not counting your home none good and what's your household income uh it's about 70 okay and saving 15 percent do you have a home mortgage no it's paid for too yes okay and you're trying to save what percentage of your income with no debt at all towards retirement well it will be 15 it should be more than that. You don't have any payments. Yeah, that's what I'm trying to figure out. Well, you don't make $700,000. You make $70,000. Right.

So, I mean, if you save 20% of that, that's $14,000 a year. Two IRAs, $6,500 each is $13,000. You need to at least be doing that at a minimum. Yeah. Does he have a 401k or you have a 401k with a match? Yeah, he matches 5%. That's why it's, that's how we were able to pay off the house. I know you say not to do that. You cashed out your 401k?

What? You cashed out your 401K? What? You cashed out your 401K? No, not cashed out completely. There's still $60,000 in it. But you took money out and paid off your house. How old is he? Four. I read your book.

Okay. Okay. All right. And the plan has always been to sell it. We had six children. It's too big. Oh, okay. So what will it sell for?

It should sell for about $250, $280. Okay. All right. Well, what I want you to do is just go to ChrisHogan360.com, use his RIQ, his retire-inspired quotient, and fill that stuff out and start planning what you need to save. You should be able to save a couple thousand dollars a month. That's $24,000 a year, and that over the next seven years is going to turn into some serious money. It ought to turn into a couple hundred grand.

And you sell this house and move down in-house to something and put another $100,000 in retirement, you should be able to put $300,000 or $400,000 aside by the time you hit 65, 66 years old, somewhere in there, and that should give you some dignity. But you don't have room in your budget, making $70,000 a year, to travel the world and retire with dignity. It's not there. So you get to choose. Which one do you want to?

So if that's what, I mean, I don't know. It should not be tight here. I mean, you can't have your own private corner at Target where you just go in there and live. You can't just spend like you're in Congress. No, you're going to have to be very, very frugal and very responsible, but then you will be able to retire with dignity and to be able to control your own destiny from that point forward. Zach is with us in Birmingham. Hi, Zach. How are you?

Good. How are you? Better than I deserve. What's up? My friend and I are hobby investors, and we like to pitch ideas back and forth to each other about different investing strategies. Recently, he told me about this. What is a hobby investor? I would just have some extra money lying around invested for fun, but not to get too serious with it. Just, you know, we can afford to lose it, but we also like to, you know, grow wealth with it at the same time. But it's outside of our retirement, 401Ks, outside of home equity, all that stuff. It's just money on the side we invest.

All right. Is your home paid for? Yes. Okay, good. What's your household income? About $60,000. Okay, good. All right.

And your question's what? He told me about this new thing called peer-to-peer lending, and I was wondering if, A, you've heard of it, and if, B, what are your thoughts on it from the investor side? Well, it's loaning money to people who can't get a loan anywhere else, which would be pretty stupid. But the loans vary in terms of risk and interest rate. But they're all people that couldn't go to the bank. If they could go to the bank, they would go to the bank. And that means they're not credit worthy,

and that means these are ultra-high-risk loans. And no, I wouldn't play in that world, not at all. Not a chance. It's a good way to learn a valuable lesson called losing your butt. And so, no. Listen, I do a lot of investing, a lot. And I don't have any money in that type of stuff, zero. And the reason is real simple.

It's just, it's a fad thing. It's like buying Bitcoin. It's a fad thing. And everybody's yakking about it. All these people that don't have any money are talking about it. But as I study millionaires, I don't find any millionaires, I mean like 1% maybe, that are hobby investors that play in fad crap and lose their money.

They buy really steady, predictable things, and they invest in that. Losing money is not a hobby of mine. It's not one I like. And so I'm not going to be doing anything in peer-to-peer at all. Zero. Zip. Nada. You do what you want to do, Zach, but you called and asked me, so that's it.

Hey, thanks for the call. This is the Dave Ramsey Show. Thank you. We've been voted one of the best places to work in Nashville 11 times. You want to know how we do it? Well, our team has been using LinkedIn jobs for years to find the best people from all over the country to come and help us change lives. Think about it. LinkedIn has more than 600 million active members. I'm talking about people who come to LinkedIn to make connections, grow their careers, and discover new job opportunities. In fact, 90% of LinkedIn users are open to new opportunities, but not actively scanning job boards. This means LinkedIn Jobs gives you access to an entirely different

demographic. Don't wait. One hire can change the direction of your company. Post a job today at linkedin.com slash Ramsey and get $50 off your first job post. That's linkedin.com slash Ramsey. Terms and conditions apply. Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee. It means even if you mess up, if you mismeasure or you pick the wrong color, they're going to remake your window blind for free. With Blinds.com, you also get free samples, free shipping, and with the new promos they run every month, you're going to save money.

Check out the promo code RAMSEY at Blinds.com. Today's question is from Jay in Arkansas. I'm 43 with a household income of $140,000 and $83,000 in student loan debt. Other than that, our only debt is the mortgage. Do we have enough time to pay off the debt, build wealth, and give generously? Sure. You enough time to pay off the debt build wealth and live and give generously sure you'll pay off that debt in two years that would be 41 000 41 500 a year and you would be debt free in two years out of 140 you'd have to get by on 100 grand? Give me a break. Of course you can do that. Definitely. Guys, that's a simple thing you can do, by the way.

One of the things that causes you to have hope is the numbers. Sometimes you get hope from the motivational talk, the coach at halftime, right? And sometimes I'm that guy. Sometimes you get hope from me kicking your butt and getting you moving sometimes you get hope from other things but really if you'll just sit down and crunch the numbers you start to go oh there is a light at the end of the tunnel that's not an oncoming train and i it's some simple big math numbers it's not anything that's rocket science here i'm not really doing some detailed analysis you i look at the shovel in the hole how big a hole are you in? How much debt have you got? Counting your house and or not counting your house, either one, usually not

counting your house. And then how big a shovel do you have? What's your income? In that case, we've got a good size shovel, $140,000 a year. That's a nice nice income in case you didn't know the average household income in america right now is 59 000 so that's substantially above average but he's got an above average student loan debt too the average student loan debt's 37 and he's sitting at 83 but look at 140 versus 83 and you start asking yourself how fast can you pay that off? Well, after taxes, you're not getting home with 140. And if you actually wanted to eat, you're not going to pay off 83 in one year. 140 minus taxes minus 83 equals zero, right?

And you're not going to have any money. So we're not going to do it in one year. Well, what if we break it into two years, like I just said? Half of that's 40 grand, $41,000 each year for two years out of $140,000. That's very, very doable. So that guy should be, if he gets on a budget, quits going out to eat, sells so much stuff that the kids think they're next, takes an extra job, lives on a budget that I mentioned he needs to live on a budget,

and his wife is helping him and they're working together if he's married. And if you do that, he should be debt-free in about 18 months, but a maximum of 24, not counting his home. Making 140, you should pay off 83. But it's just a ratio of 140 to 83. What if he told me he had a debt of $150,000? Well, it would be $50,000 a year for three years, right? That's 150 divided by three.

You follow me? And just can you do that on making 140? Yeah, you can do it. But that's going to be a long three years, and they can do it. They can get there. So you just start to look at basically how long is it going to take him to knock that out. So he's going to be 45 years old. He's going have a mortgage only can you become wealthy doing that sure you got 20 years left to invest you build your emergency fund and you start investing 15 of your income if you invest 15 of your income for 20 years you'll be a millionaire

most of you certainly if you make 140k oh and by the way during that 20 years you're probably going to get a raise or two. So we're really not projecting accurately because we don't know what the raises are going to be. But a linear projection of $140K for 20 years at 15%. That would make him a millionaire. Investing in good growth stock mutual funds inside his 401K and Roth IRAs. Just like we talk about over and over and over and over and over again. Of course, Dave Ramsey doesn't know anything about investing.

He's good for getting out of debt, but Dave Ramsey doesn't know anything about investing. No, I've just turned more people into millionaires than anybody else. That's all. But I don't do anything that's, you know, that's investing as a hobby, and I don't do anything weird, and I don't do any get-rich-quick, and I'm not trying to play a bunch of risk. I simply want to invest in something steady. The tortoise wins the race.

Every time I read the book, the hare loses. And all these people run around with flash and dash. He who hastens to be rich will not go unpunished, the Bible says. Get rich quick will get your face punched in. I'm going to start buying and selling real estate. I have no money, but I'm going to start buying and selling real estate 100% down. I mean, 100% financed.

You're going to go bankrupt, is what you just said. It's just a matter of when. Because the economy's going to cycle, and when the economy cycles, all the stupid that you're doing is exposed. Warren Buffett said, when the tide goes out, you can tell who is skinny dipping. When stupid gets stress tested, you can tell what's going on with it.

It's revealed as stupid. When you're making a ton of money and the economy is on fire and white hot, you start thinking, well, I think I can do whatever here. And you think your stupid is covered by just sheer prosperity. But that doesn't mean it's not stupid. But when stupid gets stress tested, it'll show up. Don't have to get fancy, guys. Get out of debt.

Use your income as your most powerful wealth-building tool. And become a millionaire. And retire with dignity. I'm sorry. I wish it was just some big fancy thing, but it's with dignity. I'm sorry. I wish it was just some big fancy thing, but it's really not. That's it. That's the whole thing. And if you want something more sophisticated than that,

then you're not following the data points that millionaires follow. You're following something you read and something stupid on Motley Fool or something stupid, Motley Fool or something stupid, which is aptly named or something stupid on, you know, CNN money. Well, there's two things that don't go together. I mean, think about it. Really? So, I mean, really, why don't you just study what rich people do and do what rich people

do? Why is this hard? If you want to be skinny talk to skinny people go how'd you do that i stayed away from the cookies and i ran five miles this morning all right there's your plan why is this hard it's hard because i like cookies that's the problem but that the problem with my money is not that it's some big complicated thing i don't understand the secrets of the rich no you don't want to control the person in your mirror. That's the problem. The problem with my money is the person in my mirror. If I can get this guy in my mirror to behave, he can be skinny and rich. Diego's with us in Bakersfield,

California. Hi, Diego. How are you? Good, yourself? Better than I deserve, sir. How can I help you? I have a quick question. Pretty much, we have a house, a mom's house, so we're paying her the mortgage to live there. My girlfriend's about to finish school, her extern, possibly December, January. She's going for ultrasound technician. So we're wondering, when she starts working, paycheck and save it to pay off, should I buy the house straight out from my mom, or should we invest it? Well, I would be 100% debt-free first, except the home. Do you have any debt except the home? No. Okay.

Then secondly, I would build an emergency fund of three to six months of expenses. We call that Baby Step 3. Okay. And once you've got that rainy day fund, then I would start investing 15% of your income into retirement, and beyond that, I would pay off your house early. Now, Diego, you don't have your girlfriend's name on the house that you bought from your mother.

No. Good. You should not have a house you should not own a home with someone you're not married to you will get yourself in all kinds of crap so technically speaking this is your house and she's your roommate yes okay all right legally that keeps you in pretty good shape and as long as we understand that the problem for her is unless she's got a ring on her finger called marriage, if she uses her money to pay off your house, that leaves her pretty vulnerable,

and I would recommend to her not to do that. I understand. So, you know, if you're going to start living life towards the future together, then that's why the law is all set up around marriage. And it gives her protection, you protection, and lots of other benefits, by the way. So, hey, thanks for the call, man. This is The Dave Ramsey Show. We'll be right back. Laura is with us in Rochester, New York. Welcome to the Dave Ramsey Show.

Laura, how are you? Mr. Ramsey, it's an honor. Honor to speak with you. I see on my screen you're debt-free. Congratulations. Thank you. I am so ready. Cool.

So tell me about it. How much did you pay off? Well, I paid off $28,000 in 12 months. 28 or 20? 28. 28 in 12 months. And your range of income during that year? Well, I started about $52,000 with a promotion and some good bonuses. I ended around 58.

Good for you. What do you do for a living? Yes. I'm a software trainer. I do stuff that's really, really boring that I absolutely love. I love it. That's fun. What kind of debt was the $28,000?

It was all student loans. Can you believe that? Yes, I do. I'm a trained teacher. Good for you. And you knocked it out. How long have've been out of school too long too long um i've actually been out of school about 12 years ouch i know okay so you're like well you're in your early 30s then yes i am okay cool so what happened 12 months ago that made you say, enough, Sally Mae, you're leaving?

Well, I started listening to you, and it just, I know, excuse the pun, but it snowballed. I started listening to your podcast, and that led to your book, The Total Money Makeover. That led to Financial Peace, and here we are. I got pretty quick on the train. I didn't want to wait. I was just, I was on it. I saw the end of the line and I wanted to sprint and I did. How long have you been doing software training? I have been doing software training five years and I was a substitute teacher. Okay, well you were, I mean your career set you up for this to do because you're used to saying look there's one way to do this it's the right way if you mess the syntax up it's just not going to work there's one way to do this do it the right way and so you didn't

question anything you just went in and whatever i said do you did it and it worked that's right i spent my time going to and from work um listening you and thinking, how can I do this faster? How can I squeeze this budget even more? Because I really got competitive with it. I'm not married, don't have any kids, so I had to get on my own way. So what was the craziest thing you did to save money? Oh, Dave, I stopped cutting my my hair getting my hair cut and stopped waxing my eyebrows i did it all myself you know i haven't done that in a year either

can you believe that look at that who knew good for you budget all right it wasn't it wasn't a value all right so it wasn't now budget. All right. It wasn't a value. All right. If it wasn't. Now you can go get some cosmetology back into your life, right? That's right. There will be a spa day in my future. I bet. Well, you've earned it. Way to go. I'm proud of you.

Did you have people cheering you on or people telling you you're crazy? I had a lot of people cheering me on. They also thought I was a little crazy. They just didn't show it. Don't mess with the crazy lady yeah yeah i could see the look in the back of their eyes and i'm like you know what you're you're saying go go go but you know it's good for me yeah maybe not for them yeah that's okay yeah i really had to separate that yeah it is good for them they're just not smart enough to know it yeah good, good for you.

Well done. Well done. So what do you tell people the key to getting out of debt is? You pay off $28,000 in 12 months, making $52,000. What's the key? What's the secret to getting out of debt? That's a pretty good ratio, right? I have to say it is a budget.

It's an excellent ratio. It's the most vanilla answer you can get, but it's true. And I use every dollar every single day. And it doesn't matter what you use. Every dollar is amazing. But once you see the numbers in black and white, there's no room to argue. You either want to pay it off or you don't. You're either going to sacrifice it or not.

You have to pick left or right. Boom. Yeah. Really? Choose this day who you will serve. Well done. left or right. Boom. Yeah. Really. Choose this day who you will serve. Well done. That's right. Very, very well done.

What was the hardest part of you for the last 12 months? Well, the hardest part, I have to say, it wasn't the sacrifice, believe it or not. It was really not having a spouse. While I have accountability partners, it wasn't the same as having someone that you come home to, you know, to talk about your struggles. Oh, man, I really wanted to go out to lunch today. You know, I had a few people in the office who asked me, and I had to say no. You know, there was no one there. I was truly only accountable to myself. Accountability partners were wonderful, but if I was going to do it, I had to rely on myself.

You know, I hear a lot of single people call in, and that was the hardest part for me. But I waited for those debt-free screens. You know, I love to hear the families get out of debt, but I heard people with my ratios, my age, my scenario, and it just gave me all the hope. There you go. That's exactly right. Well done.

Well done, well done. Thank you. Very proud of you. You're an absolute hero. We've got a copy of Chris Hogan's retire-inspired book for you, and that's the next chapter in your story to become not only debt-free, You're an absolute hero. We've got a copy of Chris Hogan's retire-inspired book for you, and that's the next chapter in your story to become not only debt-free but now a millionaire and, of course, outrageously generous as you go along. Congratulations.

Thank you. That's the plan. I've been listening to you every single day for the last two years. We're honored to have you in the audience and proud of you, very proud of you. Laura in Rochester, New York, $28,000 paid off in 12 months all by herself, $52,000 to $58,000 income. You can do it. Count it down.

Let's hear a debt-free scream. And it will be a countdown. Three, two, one. I'm debt free! That's how it's done right there. Well done, well done, well done. Man, that's awesomeness. Cindy is in Tucson.

Hi, Cindy, how are you? Good, how are you? Better than I deserve. What's up? Well, I'm really excited to talk to you, first of all. And I just want to let you know that you're getting a lot of exercise biking and walking around here because you go with me every day. Well, I'm feeling better already. Thanks. How can I help today?

Well, so I've got this little moral dilemma. I gave my niece FPU when she got married about six years ago, and to my knowledge, she never went to it. Since then, she's gone to school. She has student loans. She bought a brand-new house recently. And now she's having a medical emergency, and she wants to treat it holistically, and so she started a GoFundMe account, and she sent it to the whole family.

Of course she did. So my dilemma is I'm just having a hard time deciding if I should donate to it or not. It's not a dilemma for me. I'm not giving her a dime. Okay. I don't give money to people who do not take my financial advice. Okay. Because then I'm participating in their crazy.

Her financial plan is nuts because she doesn't have one. It's impulsive. It's irresponsible. She buys whatever she wants, and then when there's a problem, she's a victim. Right. If you finance that, you are financing crazy. Yeah, and that's kind of how I feel. I feel like she's treating us like her emergency fund that she doesn't have.

Yep, yep. And we've worked really hard to get to where we're at, and I feel like, you know, that's why she's asking us, because she thinks we have money. Yep, because we do have money. And it's not hers. Yeah. Listen, I'm not being mean here.

The bottom line is that you guys, you have done absolutely nothing wrong. I would have no tinge of guilt whatsoever this is like you walking up to somebody on the street and the guy is drunker than a skunk and he goes i need money for food and you know what he needs money for he needs money for a drink and you're about to give a drunk a drink that's that's what this gofundme account is it's buying alcohol for an alcoholic only difference is it's a different kind of misbehavior. And it's not a loving act. It's a codependent toxic act for you to respond to this.

Look up codependent. Read the book Boundaries by Dr. Henry Cloud. I wouldn't give her a dime. I'd be kind about it. I just probably wouldn't respond at all. I'd just ignore it. This is the Dave Ramsey Show. Matthew is with us in Tucson, Arizona. Hey, Matthew, welcome to the Dave Ramsey Show.

Hey, Dave, thanks for taking my call. Appreciate it. Sure, what's up? So I have a question about buying a house, okay? I am currently in debt. We are working our snowballs and we are living in an apartment and we're paying about $950 in rent. Now, you would tell me do not go into debt, buy a house.

And that's really good advice, and I agree with that. My question is, what if the number doesn't change? What if I get a house and my mortgage is $940 and I'm still working the snowballs and the math doesn't change? Oh, you're saying, I would say, don't buy a house until you're out of debt and have your emergency fund in place and then a down payment. Well, the reason is pretty simple. Housing is never as simple as you're laying it out because the number does change.

It's more expensive to own a home than it is to rent on a monthly cash flow basis. Because that $950 payment also represents a hot water heater that goes out or a heating and air system that has to be updated or a roof that leaks and grass that has to be cut and so on. There's always costs associated with operating a home. It's worth it. Home ownership is worth it because it goes up in value and because you stabilize your monthly payment. It's worth it in the long haul. So I love the idea of you owning a home because your rent's going to go up.

Over a 10- or 15-year period, you're going to come out a lot better owning a home. But over a 10-month period, you're not, which is how you're analyzing it, which is just your monthly rent versus your monthly house payment. And we're looking to get into a home to rent, but the rent in Tucson are $1,200 and up. Yeah, I wouldn't. How much debt have you got? $32,000. Okay, and what's your household income?

I believe this last year we cleared, I think it was either $52,000 or $53,000 together. Maybe more. I'm not entirely either 52 or 53 together. Okay. Maybe more. I'm not entirely sure. That's okay. So how long are you going to take to pay off 32 then? Well, we paid a lot of snags. I wanted to have it paid off in two years.

A short story, we were renting a home and then decided we were going to save the money on that rent and move in with my parents into their small two-bedroom home with three kids and, you know, many more lives. And that didn't really work out. So it kind of put three kids and, you know, many in the life, and that didn't really work out. So it kind of put us behind, you know, two other years, basically. So we're just now very different. Why did that put you behind? I understand that it didn't work out, but why did that cost you money?

It didn't work out because all the money that we had to use, that we were trying to save, or I'm sorry, not save, but put towards debt, had to be used to get back into another apartment and then get back up to our emergency fund. It didn't cost you $15,000 to do that? In two years? Well, no. We just rushed to class and moved out of the building with our parents. Like, we had just barely got out of it.

So it was a really bad move to try to do that. But the point is you're exaggerating. Okay? If you make $50,000 a year, even with moving twice, you should be able to pay off $32,000 in two years. You know, the move did not cost you $15,000 a year

for two years. It just didn't cost you that. That's impossible. So it may cost you make it cost you a lot of hassle and it costs you to not concentrate and not focus and not stay on your budget i think that's probably the i think honestly if you wanted the answer that's it it just cost us to kind of give up and to kind of well forget it and then okay now you fell off the wagon i'm that one i believe that makes sense and's actually logical. I can't blame you for that. I've done that kind of thing myself.

So, yeah. But what I would do is say, let's start today, look forward, and say, okay, 50 plus whatever income we can pick up doing other things, and we're going to just bear down and say, boom, how fast can we pay off 32 making 50? Well, if you paid off 15 a year, you'd be 16 a year, you'd be done in two years. And you can do that. That's very, very doable year you'd be done in two years and you can you can do that that's very very doable as a matter of fact i think you're probably going to do it in 18 months because i think you're really going to be sick of that apartment you're going to be

on beans and rice rice and beans we're going to focus completely focused we're going to lean into this we're not going to get distracted ever again it's complete blinders we're looking only at the goal don't care what anybody thinks not going to discuss this with anybody. We're just going to do it. And when you lean in like that with that complete focus, you can do that. Have you guys been through Financial Peace University? Yeah, we went through with our church. Like I said, that was, what, three years ago now. Go back through.

Okay. And let that, as a matter of fact, let me sign you up again because it's on a membership basis now. And that will get you into the EveryDollarPlus and give you the online access and plug in again. Because what you've got to do, you need to get the peer pressure around you that's positive. Other people that are on the path that'll hold you accountable and say, stick with it, dude. Stay on. Stay on. Stay on the road.

Don't get in the ditch. Stay on the road. Don't get in the ditch. Stay on the road. Don't get in the ditch. And yeah, go back. Join another group. I'll pay for it. You can go back there and I'll get you signed up for all the online for a year and the every dollar plus for a year and then join a group in the area again.

And because that's what you've just you've gotten distracted. And I'm trying more than anything. I'm trying to get your focus back. And I want your focus to be laser, extreme. And then you're going to get your house. You're going to get your house. But don't let the house get you. If you had owned a house with what you've been through in the last two years,

you might have gotten foreclosed on. You could have been in a real mess here. Because your budget's tight. I mean, you've got kids running around. You've got debt coming out your ears. You've got a tight budget. And the house represents risk in that situation. That's why we always say, Murphy, move in your spare bedroom

and bring his three cousins, broke, desperate, and stupid, with him. So hold on, and I'll have Kelly pick up, and we'll get you re-signed and get you in the Financial Peace University membership for a year. All right. Tiffany is with us in New York City. Hi, Tiffany. How are you? Hi.

I'm great. I'm tired of living off of rice and beans. I've been watching your show since December. Cool. My question to you. How much should I be putting into my 401K with an income of $30,000 a year with no company match. Does it have a Roth 401k?

Correct. Mass Mutual. Who? With Mass Mutual. I wouldn't do anything with them. The 401k is with Mass Mutual? Correct. Really?

Huh. It's a whole life company. There's mutual funds available in it? I just began with them, so... Okay. Well, here's the thing. If you're debt-free, are you? No, actually, I owe $5,000.

Then you should not be doing that. You said you've been watching us since December in your own beans and rice. Baby step one is $1,000 saved. Right. I thought that saved up. Okay. Baby step two is to become debt-free other than your home. So you've got to pay the $5,000 off before you start investing.

Baby step three is an emergency fund of three to six months of expenses. And then baby step four is 15% of your income, which is $4,500 a year in your case, going into your retirement plan. Now, in your case, if you don't have a match, I would go to a ira and pick the four types of mutual funds that we're talking about only when you get to baby step four only when you get to baby step four but you need to get the five thousand dollars paid off build your emergency fund first then start investing 15 of your income multiply 15 times your% times your income, and if it's $30,000 income, that's going to tell you it's $4,500. And that'll get you there. And that'll get you started. That's a healthy amount to start investing. But don't do that until you get these other things cleared up. That's baby step four. And you don't do baby step four until one, two, and three have been done. Do these

things in that order, because you need to lay the foundation in place to be able to build the house on. Don't build the house without the foundation in place first. So good question. Thanks for joining us. Brandy is on Twitter. Is there any benefit to recasting your mortgage after making a large principal payment? No. Recasting your mortgage is, let's say you paid your mortgage down, paid it way down, and you reset. The payments were originally set on 30 years, but you paid it so far down now that it's going to pay off in about seven or eight years. And recasting it is to set the payment to drop your monthly payment down on a longer term. It's going to keep you in debt longer if you paid that lowered payment. Recasting lowers your payment over a longer period of time, resets the mortgage.

You don't want to do that. You want to pay it off as quickly as possible. There's no benefit whatsoever to that. As a matter of fact, it's a reverse benefit. Thanks for the question on Twitter. That puts this hour of The Dave Ramsey Show in the books. This is James Childs, producer of The Dave Ramsey Show. Once again, you made The Dave Ramsey Show one of the top five most downloaded podcasts last year.

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